a study on the indian pharmaceutical sector

8/11/2019 A Study on the Indian Pharmaceutical Sector

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INTELLECTUAL PROPERTY RIGHTS

TERM PAPER

ON

A STUDY ON EVERGREENING STRATEGIES & THE

INDIAN PHARMECEUTICAL SECTOR.

BY

HARISH KUMAR BISOYI.

1226113118


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EVERGREENING STRATEGIES

Evergreening Strategy

Patent ever-greening refers to a strategy of obtaining multiple patents that covers various aspectsof the same product. Even though it is not a formal concept of patent law, patent owners utilizethis process to extend their monopoly privileges. Some examples include seeking subsequent

patents on derivatives of existing drugs, altering the mixture of isomers, identifying compoundswith the same molecular formula but different structural formulas, or patenting methods ofadministration of an existing drug.

Evergreen Revolution in the country to provi de for increasing food caused some controversyin the pharmaceutical industry. Ever greening is often resorted to by companies to extend theterm of protection to their products shortly before the patent is about to expire. Here is an

interesting case where a drug manufacturer fights to manufacture a drug at low cost after expiryof its patent held by another drug manufacturer demands but what does Ever Greening mean inthe context of patents and especially with regard to the pharmacy industry?

Well, a company manufactures a product for which it secures a patent. Shortly before theexpiration of that patent, the company files a new patent that revises or extends the term of

protection. This is what evergreening is all about. Ever greening is a method by whichtechnology producers keep their products updated, with the intent of maintaining patent

protection for longer periods of time than would normally be permissible under the law. It refersto increasing the life of the patent or the patent term beyond 20 years to reap the benefits for a

much longer period of time.Drug patent ever greening is the single most important strategy that multinational pharmaceuticalcompanies have been using. One form of ever greening occurs when the original manufacturerstockpiles patent protection by obtaining separate 20 -year patents on multiple attributes of asingle product. These patents can cover everything from aspects of the manufacturing

process to tablet colour, or even a chemical produced by the body when the drug is ingestedand metabolized by the patient.

The ultimate consequence could be that the generic equivalents of the drug would be prohibitedfrom entering the market so the price of the drug of the Innovator Company will be higher evenafter the patent expiry in absence of competition from generic drug makers may be used bymanufacturers of a particular drug to restrict or prevent competition from manufacturers ofgeneric equivalents to that drug. The process of ever greening may involve specific aspects of

patent law and international trade law. The main arguments in favor of governmentsregulating against ever greening are that rapid entry of multiple generic competitors after

patent expiry is likely to lower prices and facilitate competition, and that eventual loss of


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monopoly was part of the trade-off for the initial award of patent (or intellectual monopoly privilege) protection in the first place.

Introduction

To balance the at times competing goals of increasing access to new drugs on the one hand, andrewarding drug innovation via patents on the other hand, drug manufacturers are grantedexclusive manufacturing rights for periods of up to 20 years. This can generate large revenuesthat often exceed initial investments, thus providing an incentive for pharmaceutical companiesto develop new drugs. However, profits have increasingly come under pressure because ofstricter regulatory procedures for drug approval, implementation of price control policies, andincreased competition by generic drugs. Pharmaceutical companies have responded bydeveloping a number of tactics to extend market monopoly. These are known as evergreeningstrategies, or more euphemist ically as life cycle management, with sometimes questionable

benefit to society.

One common strategy is the patenting and marketing of a single enantiomer of an alreadyapproved drug. When large-scale production of enantiopure compounds was first possible in the1980s, it was expected that the use of these drugs would translate into direct health benefits forthe patient, e.g., in the form of better tolerability. However, there is currently no clear evidenceof increased efficacy or tolerability of enantiopure compounds over racemic combinations. Themarketing of enantiopure compounds with questionable advantages over the original drug is justone example of an evergreening strategy. Other evergreening techniques include patentingcombination formulations, structural analogues, active metabolic types, and slow-release forms.The specific impact of these second- generation products, or follow -on drugs, on overall

healthcare costs has not been well studied.

Hospitals usually adopt a payer perspective strategy, trying to minimize acquisition costs fortheir medications. Usually, pharmaceutical companies offer high rebates to hospitals on their

brand or follow-on drugs to assure that the hospitals will buy and use their drugs, speculatingthat hospital prescription patterns may influence prescription patterns in the community in theirfavour. The objective of our study was to assess the overall costs associated with the prescriptionof follow- on drugs as a result of an evergreening strategy over a 9 -y period in the Swiss cantonof Geneva. In addition, we aimed to calculate the financial impact of the Geneva UniversityHospitals (HUG) restrictive drug formulary (RDF) on overall healthcare costs, the so called

spillover effect .

Innovator Product vs. Generic - Extended Patents

In relation to generic manufacturers, originators use patenting practices, aiming at replacing theoriginal preparation by similar follow-on-products through simple proprietary modifications andor name changes, and subsequently placing them on the market just before the expiry of the


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exclusivity so that they can assume the economic role of the original specimen. Themanufacturer of the original product seems less interested in obtaining the broadest possible

patent basis for his first gen eration drug, than in the further course of products life cycle, i.e. hetries to develop innovative patentable variations which will enable him to extend the first productlife cycles. After patent expiry, generic manufacturers can file an application for an equivalentinnovator drug. However, this also means that a prodigious amount of investment is at risk forinnovator companies. To protect their interests, originator companies engage in evergreeningwhich involves i.e.: forming patent clusters, secondary patent applications, divisional patentapplications or conclusion of agreements with generic manufacturers in order to postponegeneric market entry. While such defensive strategies are frequently used in the pharmaceuticalsector, comparable practices of patent applications are not unprecedented in other industriesEither. Patent thickets or patent clusters are formed when originators file numerous broadand weak patents around the original molecule patent. Divisional patent applications sp lit

parent patent application into one or several narrower patent applications. Clusters and thickets

have the effect of increasing the uncertainty of the generic manufacturer regarding theoriginators IP rights when it attempts to enter the market, becau se it cannot properly asses thescope of the innovators IP portfolio. Generics are left with two options: either to wait until allthe patents forming the patent family have expired, or to apply for a marketing authorization andrun the risk of litigation. Hence, such practices can have the effect of limiting competition, whichraises the question as to whether they might contravene the relevant provisions of TFEU? Theanswer to such a question will obviously depend on the particular facts and circumstances

present in each case. However, there are some general arguments and considerations to be bornein mind in this context. It has been suggested that when clusters serve the sole purpose ofeliminating potential competition, this is not in line with the un derlying objectives of the patent

system and is anti- competitive. The European Commission in its turn seems to take the viewthat legitimate business practices cannot become illegitimate simply by their cumulativeapplication, but that there clearly is a problem if permissible patenting and enforcement practicescan be used in cases where there is little or no legal justification for them.

Nevertheless, it has also concluded that Strong patent protection promotes ex ante incentives toinnovate. If the invention is new, involves an inventive step and is susceptible to industrialapplication it is patentable, and Competition law should not second guess. Another defensivestrategy used by innovator companies is to file applications for secondary or follow-on-patents.Secondary or follow-on- patents, also called reformulations remain the most popular and,arguably, the most effective way to prolong a products commercial life, since it can delaycompetition between products based on same original invention. H owever, patenting throughoutlife of a product is not novel and not restricted to the pharmaceutical sector. Moreover, if it can

be confirmed that:

A follow-on inventor that has made a valuable further development is not usually seen as aninfringer, because courts tend to narrow the technical scope of the patent or, at least they refrain


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from expanding it through the doctrine of equivalence. Extra incentives are made available forthe radical improver, so as to prevent him being held up by an earlier patent.

It is a fair question to ask why an innovator applying for a secondary patent should be treatedless favorably. Yet, one of the main issues emphasized by the Commission in its PreliminaryReport concerns the quality of such late secondary patents. In that regard, the Commission'ssuccess statistics of the patent opposition and appeals between originator and genericmanufacturers raise doubts whether the expected quality and legal safeguards of the patenting

process are always fully observed. In order to prevent or delay market access, innovatorsoccasionally conclude agreements with generic manufacturers, whereby, in exchange fordelaying market entry, the generic companies accept compensation payments or other benefitsfrom innovator companies or enter into settlement agreements. However, the settlement of patentinfringement disputes is only to be considered under the ambit of cartel law in so far as thevalidity or the substantive scope of a property right is seriously in doubt. Such reverse

payments are defined as a variety of diverse agreements between patent owners and allegedinfringers that involve a transfer of consideration from the patent owner to the alleged infringer.The mere presence or amount of reverse payments is not sufficient to conclude that patentsettlements were illegal, nor do any estimates of an eventual outcome of a patent infringementdispute warrant such However, when competing manufacturers agree on restrictions that go

beyond the exclusivity rendered normally by a patent, such a decision not to compete constitutesa hardcore restriction under Art. 4 (1) of the Technology Transfer Guidelines Combe describesyet another strategy of pharmaceutical companies, called "pseudo-generics" strategy. The

primary patentee indirectly enters the generics market by launching himself a generic drug, butentrusts the distribution to another firm through a licensing agreement, without the prescriber or

consumer being informed of the ties between the two companies. At first glance, the pseudo-generics appear to have a pro-competitive effect, as new products are launched on the market.However, in comparative terms, the presence of pseudo- generics, sold at too low prices, mayalso limit the entry of "real" generics.

TRIPS Perspective

Although multilateral treaties on patents have existed since the late nineteenth century, for muchof the twentieth century, countries that opposed pharmaceutical product patents simplydisallowed such patents. In the mid-1980s, as many as fifty countries prohibited pharmaceutical

product patents; this list included a few developed countries, such as Spain and Portugal, butconsisted primarily of large middle- and low-income nations, such as Brazil, India, Mexico andEgypt. Around this time, industries across a variety of sectors in the United States claimed thatthey were suffering heavy losses because of the absence of adequate intellectual property

protection in foreign markets. The U.S. International Trade Commission confirmed these claims,estimating that American firms were losing about $50 billion a year from lack of overseas


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intellectual property protection. This led American businesses to call upon their government toseek greater intellectual property protection in international trade agreements. When the UruguayRound of multinational trade negotiations began in 1986, the United States mounted a campaignthat succeeded in adding Trade -Related Aspects of Intellectual Property Rights, or TRIPS, tothe agenda. Low-income countries were initially reluctant to join a binding intellectual propertyagreement negotiators from these countries worried about drug accessibility issues, and saw no

benefit in a global intellectual property regime that rewarded innovation that largely came fromdeveloped nations. However, the promise of gains in other trade areas, coupled with practicessuch as the United States use of its domestic law to undertake trade retaliation against stateswith unfair intellectual property laws, eventually persuaded these countries to j oin such anagreement. On January 1, 1995, the Uruguay Round of negotiations ended with the establishmentof the WTO, whose members were all required to sign on to the new, binding TRIPS agreement.Section 5 of Part II of this agreement covers patents, and Articles 27 and 28, which form the coreof this section, grant pharmaceutical innovators strong patent protections. Article 27 establishes a

ceiling for patentability requirements, by requiring that patents be available

For any inventions . . . in all fields of technology, provided that they are new, involve aninventive step and are capable of industrial application.The article confirms that TRIPS requiresall its signatories to allow pharmaceutical product patents. Article 28, which defines the rightsconferred by a patent, prohibits third parties from making, using, offering for sale, selling orimporting a product that is patented without the consent of the patent holder. It thus preventsgeneric drug manufacturers from infringing upon pharmaceutical product patents. Together,Articles 27 and 28 of TRIPS establish an international patent protection regime for

pharmaceutical products. Over seventy countries signed on to TRIPS at the start of 1995,

including Spain, Portugal, Brazil, India, Mexico and Egypt. Today, with one hundred and fifty-nine TRIPS signatories, Articles 27 and 28 enjoy near-universal authority. Signatories thatviolate these Articles, or any other part of the TRIPS agreement, can be brought before theWTOs dispute resolution body, which may allow other signatories to impose retaliatory tradesanctions. The patent protections granted by Articles 27 and 28, however, have their limits. First,Article 27 does not define the terms new, inventive step, and industrial application. T RIPSsignatories are thus free to define these terms in a way that makes it difficult to obtain

pharmaceutical product patents. Second, Article 27 permits exclusions from patentability wherenecessary to protect order public or The Success of, and Response to, Indias Law against PatentLayering 213 morality. However, this exclusion cannot be made merely because theexploitation is prohibited by a states law, and it must be linked to a complete ban on thecommercial exploitation of the excluded invention. This is a very narrow limitation, since itallows TRIPS signatories to prohibit pharmaceutical product patents only if all pharmaceutical

products in the country are produced and distributed noncommercial. Additionally, a signatorysdecision to use this exclusion is subject to a WTO panels scrutiny. Third, Article 31 of TRIPSlimits the scope of Article 28 by allowing signatory governments to undertake compulsory


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licensing schemes for patents if they meet a set of conditions. Compulsory licensing occurs whena government licenses, or permits a third party to license, a patent holders exclusive right to use,manufacture, import or sell its patented invention, without the patent holders consent. Article 31allows TRIPS signatories to license branded drug manufacturers product patents to generic drugcompanies without the formers consent, for such reasons as poverty or high incidence ofdisease. However, signatories that undertake compulsory licensing are required to pay patentholders adequate remuneration. Although TRIPS has provided branded drug manufacturerswith an unprecedented level of international patent protection, this protection comes with limits.The limits discussed above show that TRIPS signatories have several mechanisms at theirdisposal to restrict the market exclusivity available to drug manufacturers. Low income TRIPSsignatories are likely to employ these mechanisms: the WTOs 2001 Doha Declaration, proposed

by a number of low- income countries, declares that the TRIPS agreement can and should beinterpreted and implemented in a manner supportive of WTO members right . . . to promoteaccess to medicines for all.

TRIPS constitute only one aspect of the global patent protection landscape. For the past fivedecades, countries have been entering into bilateral and multilateral investment treaties. Today,there are over three thousand such international investment agreements (IIAs), and over onehundred and eighty countries have entered into at least one such agreement. IIAs enshrine anassortment of standards for the treatment of foreign investors and their investments. They protectinvestments made by one partys investors from direct and indirect expropriation by another

party, guarantee each partys investors fair and equitable treatm ent, and protect foreign investorson the basis of most-favored-nation and national treatment principles. Moreover, IIAs allowaggrieved foreign investors to directly settle their disputes with a host state through arbitration.

Given the ubiquity of IIAs, and the multinational nature of many pharmaceutical innovators,states that look to limit the patent protections available to pharmaceutical innovators ought to beaware of their obligations under these agreements. Most IIAs consider patents to be aninvestment, and protect the foreign investors that directly or indirectly own patents in a countryfrom the expropriation of their intellectual property. A state can therefore revoke a

pharmaceutical innovators patent, only to learn that a foreign investor wit h standing under anIIA owned that patent, and has decided to seek damages for the states breach of its obligationnot to expropriate foreign-owned investment. IIAs also protect foreign investors from theindirect expropriation of their patents. Indirect expropriation refers to instances when an investorstill holds legal title to its investment, but is substantially deprived of the use of, or benefits from,the investment as a result of state action. A state that issues a compulsory license for a foreign-owned patent, rather than revoking the patent, might find itself in breach of an obligation not toindirectly expropriate foreign investment. There is little certainty regarding what amounts toindirect expropriation, and where the difference lies between non-compensable, legitimate stateregulation and compensable indirect Despite these uncertainties, one commentator notes that a


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pharmaceutical innovator whose patent is subject to a compulsory license in a foreign countrymay be able to seek relief for indirect expropriation under an available IIA, if(1) The terms of the license, and the level of compensation provided, are such that the drugmanufacturer can claim substantial deprivation of its patent;(2) The compulsory license goes against the legitimate or reasonable expectations of themanufacturer; and(3) Elements such as bad faith or discrimination influence the compulsory license.

IIAs become less useful to pharmaceutical innovators when a state denies a drug manufacturer a patent, instead of granting but then revoking a patent. In these cases, there is a question as towhether an invention that has not received a patent is an investment protected by an IIA. A fewIIAs suggest that patentable inventions may be considered investments: the bilateral investmenttreaty between the United States and Jamaica, for example, includes patentable inventions inits definition of investment, while the Canada-Argentina bilateral investment treaty speaks of

rights with respect to patents. However, many if not most IIAs include intellectual propertyrights in their list of investments only insofar as these rights are recognized by the governmenthosting the investment. This implies that inventions that have been denied patents are oftenexcluded from protection under IIAs. Licensing That said, a state that denies a pharmaceuticalinnovator a patent in an opaque, inconsistent or arbitrary manner might be in breach of itsobligation to subject foreign investors to fair and equitable treatment (FET) under an IIA. TheFET standard is broad, and its meaning is grounded in the specific facts and the specific treatylanguage of a particular case. Generally, it may be viewed as a guarantee by a host state to treatforeign investors in a transparent, consistent, and even-handed manner, so as not to affect the

basic expectations of a foreign investor when it makes an investment. Several arbitral tribunals

have reasoned that not all opaque, or inconsistent state acts violate FET for an act to violateFET it must be gross ly unfair, in a manner that shocks . . . a sense of judicial propriety. Onecan conceive of certain circumstances under which a pharmaceutical innovator, subject toforeign state actions that limit its market exclusivity over a drug, may be able to claim a violationof FET.

Existence of Evergreening

It has been in practice since the passage of the Waxman-Hatch legislation (Drug pricecompetition and Patent term restoration act) in 1984, in which the pioneer drug can receive anextension term equal to one-half the time of the investigational new drug (IND) period, runningfrom the start of the human clinical trial to the time till the new drug application (NDA) issubmitted.

Evergreening strategies usually followed by the pharmaceutical industries involve:
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1. Redundant extensions and creations of next generation drugs which result in superfluousvariation to a product and then patenting it as a new application.

2. Prescription to over-the-counter (OTC) switch.3. Exclusive partnerships with cream of generic drug players in the MARKET prior to drug

patent expiry thus significantly enhancing the brand value and interim earning royalties onthe product.

4. Defensive pricing strategies practice wherein the innovator companies decrease the price ofthe product in line with the generic players for healthy competition and

5. Establishment of subsidiary units by respective innovator companies in generic domain before the advent of rival generic players.

Effects of Evergreening Strategies

Extending the patent period seizes the generic drug manufacturing. Once the generic drugs are being produced, the price of the drug can drop by as much as 90%. Additional costs caused bydelay in generic entry can be very significant for the public health budgets and ultimately theconsumer. The European Commission estimated a loss of around three billion Euros due todelays in the entry of generic products caused by misuse of the patent system (EuropeanCommission, 2009). In 2002, an extensive and lengthy inquiry by the USFederal TRADE Commission (FTC), found that the Waxman-Hatch legislation had resulted in asmany as 75% of new drug applications by the generic drug manufacturers experiencing legalactions under patent laws by the original brand name patent owner. This process helps inextending the exclusivity of the manufacturer over the drug however this process has left a widergap between innovation and access. Competition leads to innovation, prolonging the protection

of ideas may freeze the development and utility of the product.

Control of Evergreening

Even though the courts have made some minimal efforts to limit evergreening practices usingexisting doctrines, it fails to completely abolish this practice from the industry. In 2005, Indiatook a proactive step and amended the Indian Patent Act to introduce, inter alia , to curbevergreening practices by statutorily prohibiting these practices.

Section 3(d) of Indias Patent Act states that the following are not inventions:

The mere discovery of a new form of a known substance which does not result in theenhancement of the known efficacy of that substance or the mere discovery of any new propertyor new use for a known substance or of the mere use of a known process results in a new productor employs at least one reactant. Explanation - For the purpose of this clause, salts, esters,

polymorphs, metabolites, pure form, particle size, isomers, and mixture of isomers, complexes,
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combinations and other derivatives of known substances shall be considered to be samesubstance, unless they differ significantly in properties with regard to efficacy.

Australian law also includes safeguards against evergreening, by introducing penalties for suchactivities in Section 26C and 26D of Australia Patent Act 1990 and a mechanism for damages to

be paid to the government for proven evergreening practices.

Article 18.9.4 of the Republic of Korea-United States Free Trade Agreement (KORUSFTA) has been specifically drafted to permit the establishment of pharmaceutical patent anti -evergreening oversight agency.

Novartis vs. The Supreme Court of India.

Novartis v. Union of India & Others is a landmark decision by a two-judge bench of the IndianSupreme Court on the issue of whether Novartis could patent Gleevec in India, and was theculmination of a seven-year-long litigation fought by Novartis. The Supreme Court upheld theIndian patent office's rejection of the patent application.

The patent application at the center of the case was filed by Novartis in India in 1998, after Indiahad agreed to enter the World Trade Organization and to abide by worldwide intellectual

property standards under the TRIPS agreement. As part of this agreement, India made changes toits patent law; the biggest of which was that prior to these changes, patents on products were notallowed, while afterwards they were, albeit with restrictions. These changes came into effect in2005, so Novartis' patent application waited in a "mailbox" with others until then, under

procedures that India instituted to manage the transition. India also passed certain amendments to

its patent law in 2005, just before the laws came into effect, which played a key role in therejection of the patent application.

The patent application claimed the final form of Gleevec (the beta crystalline form ofimatinib mesylate) . In 1993, during the time India did not allow patents on products, Novartishad patented imatinib, with salts vaguely specified, in many countries but could not patent it inIndia. The key differences between the two patent applications, were that the 1998 patentapplication specified the counter ion( Gleevec is a specific salt - imatinib mesylate) while the1993 patent application did not claim any specific salts nor did it mention mesylate, and the 1998

patent application specified the solid form of Gleevec - the way the individual molecules are

packed together into a solid when the drug itself is manufactured (this is separate from processes by which the drug itself is formulated into pills or capsules) - while the 1993 patent applicationdid not. The solid form of imatinib mesylate in Gleevec is beta crystalline.

As provided under the TRIPS agreement, Novartis applied for Exclusive Marketing Rights(EMR) for Gleevec from the Indian Patent Office and the EMR were granted in November 2003.

Novartis made use of the EMR to obtain orders against some generic manufacturers who hadalready launched Gleevec in India. Novartis set the price of Gleevec at USD 2666 per patient per
http://www.ustr.gov/trade-agreements/free-trade-agreements/korus-fta/http://en.wikipedia.org/wiki/Landmark_decisionhttp://en.wikipedia.org/wiki/Indian_Supreme_Courthttp://en.wikipedia.org/wiki/Indian_Supreme_Courthttp://en.wikipedia.org/wiki/Novartishttp://en.wikipedia.org/wiki/Imatinibhttp://en.wikipedia.org/wiki/World_Trade_Organizationhttp://en.wikipedia.org/wiki/TRIPShttp://en.wikipedia.org/wiki/Mesylatehttp://en.wikipedia.org/wiki/Salt_(chemistry)http://en.wikipedia.org/wiki/Counterionhttp://en.wikipedia.org/wiki/Active_ingredienthttp://en.wikipedia.org/wiki/Pharmaceutical_formulationhttp://en.wikipedia.org/wiki/Pharmaceutical_formulationhttp://en.wikipedia.org/wiki/Active_ingredienthttp://en.wikipedia.org/wiki/Counterionhttp://en.wikipedia.org/wiki/Salt_(chemistry)http://en.wikipedia.org/wiki/Mesylatehttp://en.wikipedia.org/wiki/TRIPShttp://en.wikipedia.org/wiki/World_Trade_Organizationhttp://en.wikipedia.org/wiki/Imatinibhttp://en.wikipedia.org/wiki/Novartishttp://en.wikipedia.org/wiki/Indian_Supreme_Courthttp://en.wikipedia.org/wiki/Indian_Supreme_Courthttp://en.wikipedia.org/wiki/Landmark_decisionhttp://www.ustr.gov/trade-agreements/free-trade-agreements/korus-fta/


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month; generic companies were selling their versions at USD 177 to 266 per patient per month. Novartis also initiated a program to assist patients who could not afford its version of the drug,concurrent with its product launch.

When examination of Novartis' patent application began in 2005, it came under immediate attack

from oppositions initiated by generic companies that were already selling Gleevec in India and by advocacy groups. The application was rejected by the patent office and by an appeal board.The key basis for the rejection was the part of Indian patent law that was created by amendmentin 2005, describing the patentability of new uses for known drugs and modifications of knowndrugs. That section, Paragraph 3d, specified that such inventions are patentable only if "theydiffer significantly in properties with regard to efficacy." At one point, Novartis went to court totry to invalidate Paragraph 3d; it argued that the provision was unconstitutionally vague and thatit violated TRIPS. Novartis lost that case and did not appeal. Novartis did appeal the rejection bythe patent office to India's Supreme Court, which took the case.

The Supreme Court case hinged on the interpretation of Paragraph 3d. The Supreme Courtdecided that the substance that Novartis sought to patent was indeed a modification of a knowndrug (the raw form of imatinib, which was publicly disclosed in the 1993 patent application andin scientific articles), that Novartis did not present evidence of a difference in therapeuticefficacy between the final form of Gleevec and the raw form of imatinib, and that therefore the

patent application was properly rejected by the patent office and lower courts.

Although the court ruled narrowly, and took care to note that the subject application was filedduring a time of transition in Indian patent law, the decision generated widespread global newscoverage and reignited debates on balancing public good with monopolistic pricing andinnovation with affordability. Had Novartis won and gotten its patent issued, it could not have

prevented generics companies in India from continuing to sell generic Gleevec, but it could haveobligated them to pay a reasonable royalty under a grandfather clause included in India's patentlaw.

Conclusion

The patent evergreening promotes development of unfair means of competition. Enhancedintellectual property scrutiny may remove the roadblock for generic drugs and thereby providethe masses with cost effective medicines. This will be required to bring balance betweeninventions and affordability. If we see the actions taken by a few countries, it leaves others witha ray of hope. The difficulty suggested by the fact that numerous knowledgeable observers havereached strongly contrasting views concerning the propriety of improvement patenting, theextent of any possible negative social impact of thi s practice, and even the term evergreeningitself. Further consideration of possible evergreening practices may nonetheless assist in theidentification of policy concerns, aiding in the current legislative debate of reforms to the patentsystem.
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A STUDY ON THE INDIAN PHARMACEUTICAL SECTOR

Introduction

The Indian pharmaceutical industry is a successful, high-technology-based industry that haswitnessed consistent growth over the past three decades. The current industry players compriseseveral privately owned Indian companies that have captured a substantial share in the domestic

pharmaceutical market due to factors such as favorable government policies and limitedcompetition from overseas. However, the liberalization of the Indian economy is revolutionizingIndian industries as they begin to emerge from domestic markets and gear up for internationalcompetition. The Indian pharmaceutical industry is a prime example of an industry that is beingforced to revisit its long-term strategies and business models as India opens its markets to globaltrade. Factors such as protection of intellectual property are increasing in significance due to the

growing recognition of the need to ensure protection of valuable investments in research anddevelopment (R&D). Efforts are being made in India to curb problems of weak enforceability ofexisting intellectual property legislations, and the Indian government is moving towardsestablishing a patent regime that is conducive to technological advances and is in keeping withits global commitments. India is among the top five emerging pharma market and has grown atan estimated compound annual growth rate (CAGR) of 13 per cent during the period FY 2009 2013. The Indian pharmaceutical market is poised to grow to US$ 55 billion by 2020 from the2009 levels of US$ 12.6 billion, according to the report titled India Pharma 2020 by McKinsey& Co.

A new cluster of countries is contributing to the growth of the pharma industry, resulting in arobust jump in exports of drugs . The countrys pharma industry accounts for about 1.4 per centof the global pharma industry in value terms and 10 per cent in volume terms. Both domestic andexport-led demand contributed towards the robust performance of the sector. An increase ininsurance coverage, an ageing population, rising income, greater awareness of personal healthand hygiene, easy access to high-quality healthcare facilities and favorable governmentinitiatives are some of the important factors expected to drive the pharma industry in India. TheGovernment of India has unveiled Pharma Vision 2020 aimed at making India a global leaderin end-to-end drug manufacturing.

Market Size

On improved utilization of manufacturing facilities, the domestic pharmaceutical market is likelyto see high revenue growth and profit margins. Pharmaceutical sales in India are expected togrow by 14.4 per cent to US$ 27 billion in 2016 from US$ 22.6 billion in 2012, according to areport by Deloitte called 2014 Global Life Sciences Outlook.


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India s pharmaceutical exports stood at US$ 14.84 billion in FY 2013 14. The United States(US) is the countrys biggest market for pharma exports accounting for about 25 per cent,followed by the United Kingdom (UK). Pharma exports from India will be more than the size ofthe domestic sales by FY 2015, according to a report by India Ratings & Research. The country

provides generic medicines to almost 200 countries. It is responsible for about 40 per cent of thegeneric and over-the-counter drugs consumed in the US. Indian generics market is expected togrow to US$ 26.1 billion by 2016 from US$ 11.3 billion in 2011.

Investments

The allowance of foreign direct investment (FDI) in Indias pharma sector was well received byforeign investors. The cumulative drugs and pharmaceuticals sector attracted FDI worth US$11,588.42 million in the period April 2000 February 2014, according to data published byDepartment of Industrial Policy and Promotion (DIPP). Some of the major investment and

developments in the Indian pharmaceutical sector include the following: Ashland Specialty Ingredients has opened a centre of excellence (CoE) focused on pharmaceuticals in Hyderabad, Andhra Pradesh. The expertise offered here would be predominantly in oral solid dosage form and a range of technical services for drugcompanies.

Sun Pharma has agreed to buy out Ranbaxy for US$ 4 billion. The landmark deal makesthe combined Sun Ranbaxy entity the fifth largest generic drug-maker in the world, withestimated revenues of US$ 4.2 billion for the year ended December 31, 2013.

Natco Pharma Ltd has received tentative approval for Oseltamivir Phosphate capsulesfrom the United States Food and Drug Administration (USFDA). Tamiflu

(Roches trade name for Oseltamivir Phosphate) had US sales of approximately US$ 495million for the 12 months ending September 2013, according to IMS Health.

Strand Life sciences have received a US patent for virtual liver, which would aid the pharmaceutical industry in understanding liver-related issues better. A virtual liver wouldhelp in predicting and assessing hepatotoxicity of novel drug compounds in pre-clinicalstudies.

Jubilant Life Sciences has received a nod from the USFDA to market a generic diureticmedicine. The drug is used to treat fluid retention in the body caused by conditions suchas congestive heart failure and cirrhosis of the liver.

ChrysCapital has invested around US$ 40 million in Torrent Pharma, expanding its portfolio of healthcare companies and taking up the total exposure in the sector to nearlyUS$ 300 million.


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Government Initiatives

As per extant policy, FDI up to 100 per cent, under the automatic route, is permitted in the pharmaceuticals sector for Greenfield investment. Hundred per cent FDI is also permitted forinvestments in existing companies under the government approval route. Further, theGovernment of India has also put in place mechanisms such as the Drug Price Control Order andthe National Pharmaceutical Pricing Authority to address the issue of affordability andavailability of medicines. The Andhra Pradesh government has announced a new life sciences

policy for the state at the 11th edition of BioAsia 2014 in Hyderabad. According to the new policy, the state will provide subsidies in power, water and provide land for setting up of new lifescience industries in the state. The state government is planning to attract an investment of Rs20,000 crore (US$ 3.33 billion) by encouraging more industries in the segment. In a move tosimplify the barcode procedures for pharmaceutical companies and to ensure quality, theGovernment of India has decided to treat mono cartons containing medicines as primary level

packaging, as per the Directorate General of Foreign Trade (DGFT). The Ministry of Chemicalsand Fertilizers has unveiled a scheme that will enable pharma units in different clusters acrossthe country to set up common infrastructure facilities with substantial financial assistance fromthe government.

Patent Law in India

Patent rights were introduced in India for the first time in 1856 and, in 1970, the Patent Act 1970(the Patents Act) was passed, repealing all previous legislations. India is also a signatory to the

Paris Convention for the protection of industrial property, 1883, and the Patent CooperationTreaty, 1970. The Patents Act provides that any invention that satisfies the criteria of newness,non-obviousness and usefulness can be the subject matter of a patent. Some of the non-

patentable inventions under the Patents Act include methods of agriculture or horticulture, processes for the medicinal, surgical, curative, prophylactic or other treatment of human beings,animals or plants or substances obtained by a mere admixture, resulting only in the aggregationof the properties of the components, etc. With regard to pharmaceuticals, in the case ofsubstances intended for use or capable of being used as food, drugs or medicines or substances

produced by chemical processes, patents are granted only for the processes of manufacture ofsuch substances and not for the substances themselves. Hence, pharmaceutical products arecurrently not granted patent protection under Indian law. India had a product patent regime forall inventions under the Patents and Designs Act 1911. However, in 1970, the governmentintroduced the new Patents Act, which excluded pharmaceuticals and agrochemical productsfrom eligibility for patents. This exclusion was introduced to break away Indias dependence onimports for bulk drugs and formulations and provide for development of a self-reliant indigenous

pharmaceutical industry. Thus, under our existing patent laws, molecules, which are products of


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chemical reactions, are as such non-patentable in India. This restriction, coupled with therestriction on mere admixtures resulting in aggregation of properties in which the components donot exhibit any synergistic behavior, severely limit the items, which can be patented in India.Actives prepared by chemical synthesis are as such non -patentable in India even if they exhibitfunctional properties. Likewise, standard drug formulations in which the ingredients behave asmere admixtures also do not qualify for patents in India. In such cases only the process, i.e. themethod of making the product is patentable. The lack of protection for product patents in

pharmaceuticals and agrochemicals had a significant impact on the Indian pharmaceuticalindustry and resulted in the development of considerable expertise in reverse engineering ofdrugs that are patentable as products throughout the industrialized world but unprotectable inIndia. As a result of this, the Indian pharmaceutical industry grew rapidly by developing cheaperversions of a number of drugs patented for the domestic market and eventually movedaggressively into the international market with generic drugs once the international patentsexpired. In addition, the Patents Act provides a number of safeguards to prevent abuse of patent

rights and provide better access to drugs. The term of patents in the case of processes or methodsof manufacture of a substance intended to be used or capable of being used as food or as amedicine or drug is for a period of seven years from the date of filing or five years from the dateof sealing the patent, whichever is less. Patents relating to all other inventions are granted for a

period of 14 years from the date of filing the patent, unless shown to be invalid. The Patents Actalso has provisions relating to compulsory licensing. On the completion of three years from thedate of sealing the patent, any person interested in working the patented invention may apply fora compulsory license with respect to the invention. The controller of patents may direct the

patent holder to grant such a license upon the terms as may be deemed fit, only if he or she issatisfied that the reasonable requirements of the public with respect to the patented invention

have not been met or that the patented invention is not available to the public at a reasonable price. In addition to compulsory licensing, the Patents Act includes a provision for licenses ofright where, in certain cases, the central government can, after the expiration of three years fromthe date of the sealing of the patent, apply for an order that the patent may be endorsed with thewords license of right, on the grounds that the reasonable requirements of the public withrespect to the patented invention have not been satisfied or that the patented invention is notavailable to the public at a reasonable price. Patents for certain substances that are not food itemsor drugs as such but that are capable of being used as food items or drugs are deemed to beendorsed with the words license of right immediately on completion of three years from thedate of the sealing of the patent. The effect of endorsing a patent with the words licenses ofright is that any person who is interested in working the patented invention in India may requestthe patentee to grant a license. The granting of a license would be on terms that have beenmutually agreed upon, even if he/she is already the holder of a license under the patent. In casethe parties are unable to agree on the terms of the license, they can apply to the controller of

patents to arrive at a settlement of terms.


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The Impact of the World Trade Organization on Pharmaceutical Patents.

The establishment of the World Trade Organization (WTO) has led to a tremendous paradigmshift in world trade. The agreement on Trade-Related (Aspects of) Intellectual Property Rights(TRIPS) was negotiated during the Uruguay round trade negotiations of the General Agreementon Tariffs and Trade (GATT) and one of the primary reasons for incorporating intellectual

property issues into the GATT framework was the pharmaceutical industry. India signed theGATT on 15 April 1994, thereby making it mandatory to comply with the requirements ofGATT, including the agreement on TRIPS. India is thereby required to meet the minimumstandards under the TRIPS Agreement in relation to patents and the pharmaceutical industry.Indias patent legislation must now include provisions for availability of patents for both

pharmaceutical products and processes inventions. Patents are to be the Indian government is

moving towards establishing a patent regime that is conducive to technological advances and isin keeping with its global commitments. Granted for a minimum term of 20 years to anyinvention of a pharmaceutical product or process that fulfils established criteria. Compulsorylicense provisions under Indian law will be required to be limited and conditional to comply withthe TRIPS Agreement, and the government will grant such licenses only on the merit of eachcase after giving the patent holder an opportunity to be heard. In addition, there will be nodiscrimination between imported and domestic products in the case of process patents, and the

burden of proof will rest with the party that infringes. India has decided to avail itself of the fulltransition period for developing countries and has until January 2005 to extend patent protectionto pharmaceutical products. In keeping with the TRIPS commitments, India has started on a

process of amending the Patents Act by providing exclusive marketing rights (EMRs) andcreating a mailbox system for patent applications for a period of five years or until the patent isgranted or rejected, whichever is earlier. This provision was introduced in the Patents(Amendment) Act 1999, which grants the inventors what is known as pipeline protection. Ifthe applicant has already filed an application for his or her invention in any convention countryand a patent or EMR has been granted in that country on or after 1 January 1995, the applicantwould be eligible to file for patent to pharmaceutical and agrochemical products in India. These

patent applications will be kept pending. When India changes its patent law as per WTOrecommendations, the pending patent application will be eligible for product patent. Until such

patent is granted or rejected or for a period of five years (whichever is less), the applicant will begranted EMRs in India if the application is found eligible. The amended Patents Act also

provides for compulsory license for the EMR on the same lines as patents and also omits a provision that prohibited Indian inventors from applying for patents outside India withoutapproval of the Indian government. The new legislative measures to meet Indias TRIPS obligations are currently in the process of being finalized. The Patents (Second Amendment) Bill


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1999, which introduces product patents for pharmaceuticals and agrochemicals in Indias patent law, is yet to be enacted, and recent press reports have indicated that the Bill is soon to be tabled

before the Indian parliament.

Patents and the future of Indian pharmaceutical sector

The absence of product patent protection for pharmaceuticals and agrochemicals led manymultinationals to limit their portfolios to patent expired products or a few selected patented

products. This resulted in an erosion of their market share because local manufacturersintroduced the most advanced medicines through reverse engineering. Foreign firms wererequired to pay royalties for international drugs, while Indian companies could access the newestmolecules from all over the world and reformulate them for sale in the domestic market. Thus,this resulted in the systematic weakening of patent rights for pharmaceutical products in India

and led to the exodus of several international research-based pharmaceutical firms. Theobligations imposed on India under the TRIPS Agreement are going to have a significant impacton Indias successful bulk and formulation -oriented pharmaceutical industry. Indian companieswill have to compete with the multinationals by focusing on drug development and thereby

producing their own patented products. Alternatively, Indian companies could focus on producing patented drugs under license from foreign companies or concentrate on generatingrevenues from producing generic drugs. Currently, conflicting views exist within the Indian drugcompanies with regard to Indias transition into Indian companies need product patent protectionto encourage research in developing inexpensive drugs that suit the Indian disease profile. The

product patent regime. Some of the existing pharmaceutical companies believe that product

patents will pave the way for innovation in India, while others hold the view that the high cost ofR&D will stifle the growth of the Indian pharmaceutical industry. The key to survival for Indian

pharmaceutical companies would be the exponential growth of R&D expenditure. Indiancompanies need product patent protection to encourage research in developing inexpensive drugsthat suit the Indian disease profile. Already the larger firms are increasing their total R&Dexpenditure as a percentage of sales and they are beginning to move in the direction of newmolecule discovery rather than concentrating solely on development research. While some firmsmay not make the transition, signs thus far suggest that a number of Indian firms willsuccessfully weather the transition and come out as more innovative companies. In addition, theadvent of product patents is bound to be a boost for multinational companies that have

previously been reluctant to invest in India in the absence of product patent protection, and it willincrease competition in the domestic market.

Pharmaceutical Sector Analysis Report 2013.

The Indian Pharmaceutical industry is highly fragmented with about 24,000 players (330 in


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the organized sector). The top ten companies make up for more than a third of the market.Globally, the Indian pharma market (IPM) is ranked 3rd largest in volume terms and 10thlargest in value terms.The domestic market grew by 14% YoY for the 12 months period ended in Dec 2012 to Rs690 bn. In the last five years, the IPM has witnessed compounded annual growth of 12.5%.The pharmaceutical sector meets around 70% of the country's demand for various types offormulations and active pharmaceutical ingredients (APIs).Besides the domestic market, Indian pharma companies also have a large chunk of theirrevenues coming from exports. While some are focusing on the generics market in the US,Europe and semi-regulated markets, others are focusing on custom manufacturing forinnovator companies. Biopharmaceuticals is also increasingly becoming an area of interestgiven the complexity in manufacture and limited competition.The drug price control order (DPCO) continues to be a menace for the industry. There arethree tiers of regulations - on bulk drugs, on formulations and on overall profitability. This has

made the profitability of the sector susceptible to the whims and fancies of the pricingauthority. The recently announced pricing policy by the DPCO on 348 drugs has alreadyimpacted various pharma companies.Introduction of GDUFA (Generic drug User Fee Act) in the US during July 2012 too had anegative impact on pharma companies. As per this Act, the generic companies are required to

pay user fees to USFDA, for application of drugs and manufacturing facilities. This fee will beutilized by USFDA to engage additional resources in order to speed up the approval process.On back of this, various companies had withdrawn pending applications which they believedto be less accretive. Though the approval procedure is expected to escalate, this will happenonly over a period of time.

As the patent cliff is approaching, Indian pharma companies have increased their R&Dexpenses. The companies are spending more to establish niche product portfolios for thefuture.

FY13/CY12 was challenging on the domestic front. The companies witnessed sluggishgrowth on the back of severe competition in the acute segment, increasing competition fromunlisted players and so on. Though the Indian Pharma Industry grew by 14% (Dec 2012) vs.15% in Dec 2011, large part of the growth was contributed by the chronic segment.

MNC pharma companies continued to witness subdued growth during FY13/CY12. These

companies were impacted by the increasing competition, drug launches by other companies before patent expiry, through compulsory licensing and patent infringements. Only couple ofcompanies exhibited better growth. The margins of these companies remained subdued due toincreasing expenses and slower top line growth.

In the US, generic companies witnessed mixed growth. While some of the companies benefited from the low competition launches, others got impacted due to delay in approvals.Though there were not many blockbuster launches during FY12 as compared to FY11,


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various companies did manage to display better growth. On the other hand, several regions ofEurope continued to face pressure on increasing efforts by governments to reduce theirhealthcare burden.

Rupee depreciation was one important aspect which helped the industry especially those

companies who had not hedged their receivables.The industry continued to face challenges on the regulatory front. During the year, there werequite a few Indian companies that faced issues from the USFDA, as they lacked goodmanufacturing practices (GMP). Because of this, there were instances of import alerts beingissued, drug recalls, warning letters and so on. The regulators have become more stringentnow and have also been conducting surprise checks.

Indian companies, in order to fuel their top line, have also made various acquisitions. Further,launches of branded drugs in the US market have also increased. Drugs like Absorica,Topicort, Dymista are few classic examples of branded launches made by these companies inthe US market.

As per IMS, India's pharmaceutical market size is expected to rise from about US$ 14 bn in2011 to US$ 24-34 bn by 2016. The growth in Indian domestic market will be boosted byincreasing consumer spending, rapid urbanization, and increasing healthcare insurance and soon. However, the introduction of the pricing policy will have negative impact on pharmacompanies. MNC pharma companies, in particular, will bear a bigger brunt of the pricing

policy since they are entirely focused on the domestic market.

The life style segments such as cardiovascular, anti-diabetes, anti-depressants and anti-

cancers will continue to be lucrative and fast growing owing to increased urbanisation andchange in lifestyle patterns. Going forward, better growth in domestic sales will depend onthe ability of companies to align their product portfolio towards these chronic therapies asthese diseases are on the rise

In various global markets, the government has been taking several cost effective measures inorder to bring down healthcare expenses. Thus, governments are focusing on speedyintroduction of generic drugs into the market. This too will benefit Indian pharma companies.However, despite this huge promise, intense competition and consequent price erosion wouldcontinue to remain a cause for concern. Over and above this, following GMP will beimportant criteria for companies in order to grow in the global markets.

For the US market, Indian companies are developing niche portfolios in various segments.High margin injectables, dermatology, respiratory, biogenetics, complex generics etc. have

become an area of interest. Most of the Indian pharmacy companies have been working onthese niche drugs in order to optimize growth and margins. Thus, post patent cliff, thecompanies which have developed their product basket in the niche category will be ahead inthe curve. Moreover, generic penetration in the US is expected to peak out at 86-87% over


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the next couple of years from 83% currently.

Overview of Patent in India Pharmaceutical Sector .

Intellectual property (IP) filings worldwide grew significantly in 2010 after experiencing aconsiderable drop in 2009. The growth of IP filings was stronger than overall economic growth.After this drop, patent and trademark filings worldwide grew by 7.2 per cent and 11.8 per cent.China and the US, the two offices accounted for the majority of worldwide growth. In the case ofChina, IP growth rates were more than double its GDP.

The upsurge witnessed is led by China, with a growth rate of over 29 per cent. The same figurestands at little over 11 per cent for India. Patent applications growth rate of India, though beinghigher than that of the whole world, i.e. just over 7.5 per cent, India accounts to only two percent of the total number of patent applications made globally. This when compared to othercountries with high growth rate is very nominal. China takes over approximately a full quarter of

the total patent applications in 2011 where as the US stands next to China with ~23 per cent andEurope at ~16 per cent.

In India, most of the patent filings are made by non-residents. On the contrary, the indigenous patent filings of rest of the world and China account to a majority chunk in patent filings.

The graphs show the ratio of residents filing patents vs. non-residents filing patents: globally, inChina and in India. On comparing the graphs, it reveals that over 60 per cent of the patent filingsare done by residents. This shows the development and the growth of the indigenous units. Whenit comes to China, the same number grows up to 79 per cent in 2011. In China, the patent filings

by residents have grown from ~54 per cent in 2005 to ~79 per cent in 2011.

The scenario seems completely opposite in India. Out of total patent filings that happen in India,residents filing patents account to just ~20 per cent whereas non-residents who file patents inIndia account to ~80 per cent. This figure has been merely changing to Indias favour in recenttimes. From 19 per cent in 2005, the Indian residents have filed up to ~21 per cent in 2011.

The current figures accrue to a high number of filings from non-residents, this portrays that theindigenous units are yet to come up to a level where they can compete globally. The non-residents look towards harnessing the Indian market for their beneficiaries. This shall also impactthe Indian economy adversely by way of slow GDP growth and the growth being overtlyattributed to overwhelming rise of non-resident filings in India. This may lead to initial inflow ofFDI, but in the long term, it may result in capital outflows as well. To help the Indian economy

be self-competitive, innovation and inventions amongst the domestic units should play a vitalrole. The ratio of domestic filings to non-residential filings needs to be reversed in coming time.Though the number of filings by domestic units has been growing constantly, the pace is notsufficient to beat the overt filings by non-residents.


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Summary of pharma patenting statistics in India

In Indian pharmaceutical sector, the number of patents filed have increased from little over 3500in 2004-2005 to over 5000 in 2010-11, thus the compounded annual growth of patents beingfiled in this industry in India was found to be around five per cent for the period 2004 -11.

However, there has been a significant change in the number of patents granted. It has raisedmanifold from 263 in 2004-05 to 2364 in 2008-9 to approximately 1000 in the recent times. Thusit not only indicates a significant improvement in quality of patents being filed but alsoseriousness among players about their IP. Another important statistic that might be worth lookingat is how pharma patenting has increased vis--vis overall growth in the total number of patentfiled in India. The graph below demonstrates that growth in pharma industry has been slower ascompared to overall growth of patenting in India. Further, it is to be noted that patent filing in

pharma sector in India is being led by MNCs rather that indigenous companies, which is aserious threat to the interests of Indian companies.

Total patent filings (2005-2011; X-axis: years, Y-axis: Number of patents filed)

( Source: WIPO-IP Statistics)


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History of pharma patent law and trade practices in India

During the last two decades, Indian patent regime has undergone humongous changes,complying with the trade Related Aspects of Intellectual Property Rights (TRIPS) agreement tomove hand in hand with the global patent scenario.

The 1970s Patent Act was made with an objective to encourage the development of anindigenous Indian pharma industry and to guarantee that the Indian public had access to low-costdrugs.

Patent filings: Residents vs. Non-residents

( Source: WIPO-IP Statistics)


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Growth of total number of patents filed in pharma industry(Includes drugs and bio-tech)

( Source: IPO)

As per Indian Patents Act 1970 only process patents were allowed for chemical entities while pharma product patents were not entertained or admissible. The term of patent protection foreven the pharma process patents was intentionally kept short so as to develop and test new drugs.This allowed Indian companies to practice reverse engineering. Such a patent act groomed thedomestic industry to build up considerable competencies and offer a large number of cheapergeneric versions of patented pharma products at lower cost as long as they used a production

process that differed from that used by the patent owner.

India signed the GATT on April 15, 1994, thereby making it mandatory to comply with therequirements of GATT, including the agreement on TRIPS. The Patent (Amendment) Act 2005implemented the product patent regime in India. The Amendment granted new patent holders a20-year monopoly starting from the date the patent was filed. Product patent regime encouragedsignificant numbers of foreign pharma companies to participate in the Indian market and, in2005; foreign drug producers filed approximately 8,926 patent applications to cover their

patented drugs sold as generics in the Indian market.

However, patentability still remains lower in India than in other market such as Brazil, Russia,the US, Europe. This is mainly because Indian patent law does not allow patenting of differentforms such as salts, esters, ethers, polymorphs and isomers. These decisions are taken on a case

by case basis.

Predicting the future

Looking at the statistics in section one of this article, the number of patent filings are not stillvery high and CAGR growth is just ~5 per cent. This indicates that generic products shall


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continue to dominate the Indian market. While the patent law will encourage the launch of newand more patent protected products, the effort on innovation will still be led by the foreign

players rather than indigenous companies. According to a prediction by McKinsey, theinnovative products can capture up to a 10 per cent share of total market by 2015. These statisticscan go in favour of Indian players only if they understand the value of R&D and innovation, elseif they just keep going behind generics they will start losing their market shares slowly toinnovators.

A graph of similar prediction for some other developing countries shows that looking at Brazilscase, we can definitely relate to what we predicted above as you can see that 14-15 per cent shareis attributed to innovative products and out of that 65-70 per cent is the share of MNCs.Accordingly, if we do not groom indigenous innovation, Indian companies are going to lose themarket to MNCs as innovative products capture more and more market. The good thing is thatwe can see that leading Indian companies are thinking in the same direction and are spendingmore on research and development of new molecules.

ConclusionThe process of liberalization initiated in 1991 has helped develop policies that are focused onattracting capital from overseas and making India a global industrial base. The resultant inflowsof foreign direct investment and technology transfers have created an environment for dynamicgrowth and increased competitiveness of Indian industry. The current revenues of the Indian

pharmaceutical industry are estimated at US$5.5 billion and it is expected to grow at a

Growing INVESTMENTS in R&D by major companies(In Rs Crs Y axis)

( Source: Product Patent Regime Posed Indian PharmaCompanies to Change Their MARKETING Strategies
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compounded annual growth rate of 19% and touch US$25 billion in revenue by 2010. India isslowly moving into global markets and competing with international quality standards and

prices. Although R&D is an important factor to ensure a competitive edge in the internationalarena, the future of the Indian pharmaceutical industry hinges on patent protection.

Rising R&D can be attributed to rising number of patents in pharma sector

R&D in pharma has been increasing significantly, from approximately $120 billion in 2007 toapproximately a little over $135 billion in the recent times. With the kind of investment goinginto R&D by the key players, they would want to maximize their earning by patenting their

process and products. We hope that even the small and mid-sized pharma companies startthinking in this direction so that Indian pharma industry as a whole can emerge as leader to theworldwide pharma industry. And with the stronger yet highly economic patent regime in India,they can be sure of protecting their interests at least in their domestic segment. For marketsoutside India and to share the costs of clinical trials, etc - they can get in to a JV with other

companies and can out- license their patented molecules to MNCs on their own terms.

a study on the indian pharmaceutical sector

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